Pinnacle released their half yearly report last night after close. You can find it here
EPS of 21c up from 16.7c PCP and up from 19.8c last half. Giving a TTM EPS of 40.8c.
PNI dividend increase of 50% on PCP to 17.5c per share fully franked.
FUM is up $4.2B to $93.6B overall despite net institutional outflows of $1.7B. Retail inflows of $2.9B and general market increases kept the FUM on the up. Pinnacle affiliates performance over the last 5 years has been amazing with 77% of funds outperforming their benchmarks. This continued last year and I surmise that the retail inflows is due to investors chasing this performance.
Pinnacles leverage on the share of NPAT continues to increase as the companies incubated "horizon 2" affiliates mature. This is evident as 1H22 affiliate NPAT increased to $137.4m from $118.2m in 1H21, an increase of 18%. Whereas Pinnacles share of this NPAT increased from $31.8m to $39.2m, an increase of 23%.
Pinnacle has seen a big pullback in share price in the last 6 months. The share price got too far away from reality especially when it was trading around $19, which was over 50x trailing PE extrapolating last years performance into the future. Now we are sitting at more reasonable multiples and the case to buy more shares is appealing. The big test will be, if this half continues as it has with further sell offs, how well will Pinnacles FUM and affiliate fees hold up. My opinion is that their strategy of broadening asset classes will help them weather any serious downturn. Obviously they will still be impacted by the cycles of financial markets, however i feel their wide variety of assets and strategies will soften the impact. As you can see from below graph management have been intentionally diversifying into an "all weather" portfolio of affiliate managers with varying strategies and asset classes. Their holdings in real assets, credit and value equities should do well if we have an extended inflationary environment.
Wow what a year for Pinnacle!
FUM continues to pile into Pinnacle's affiliates. With the current economic situation where equities are the only place to go for decent returns Pinnacle is thriving. Institutions and Retail FUM has boomed over the last 12 months, this accompanying 80% of their affiliates beating their relative benchmarks contributing performance fees has seen earnings more than double!
The company strategy of funding and backing small boutique fund managers is paying off. This gives them great diversification in earnings with potentially greater opportunity to outperform and minimising risk of significant underperformance. Boutique funds tend to be more nimble and can adjust their strategies to suit current market conditions. Pinnacle also provides some of these funds with the back end operating systems, internal infrastructure and services so they can purely focus on their investments, while also adding another steady reliable income stream for Pinnacle.
I expect over the next few years these tail winds to continue for PNI as equities really are the only place to be at the moment.
See highlights below:-
Pinnacle Investment Management Group Limited (ASX: PNI) FY2021 financial results
Pinnacle Investment Management Group Limited (PNI) is pleased to advise shareholders that the highlights of the financial results for the financial year ended 30 June 2021 (FY21) are as follows:
- Net profit after tax (NPAT) attributable to shareholders of $67.0 million, up 108% from $32.2 million in the prior financial year (FY20)
Basic earnings per share (EPS) attributable to shareholders of 38.2 cents, up 103% from 18.8 cents in FY20
Diluted earnings per share (EPS) attributable to shareholders of 36.5 cents, up 104% from 17.9 cents in FY20
Fully franked final dividend per share of 17.0 cents (up 100% from the fully franked FY20 final dividend of 8.5 cents), taking total fully franked dividends for the financial year to 28.7 cents (up 86% from the fully franked FY20 total dividends of 15.4 cents)
Pinnacle’s share of Affiliates’ NPAT was $66.4 million, up 75% from $38.0 million in FY20
Aggregate Affiliates’ funds under management (FUM) of $89.4 billion at 30 June 2021 (at 100%)
Aggregate Retail FUM of $20.3 billion at 30 June 2021 (at 100%)
Net inflows for FY21 of $16.7 billion4 ($11.25 billion in the six months ended 30 June 2021 (2H FY21)), including $4.5 billion retail ($2.6 billion in the six months ended 30 June 2020 (2H FY20)), of which $0.2 billion was LICs/LITs, all in 2H FY21
Significant growth in both aggregate funds under management and net inflows from outside of Australia during FY21
Closing FUM of $89.4 million is in excess of 20% higher than average FUM through FY21
Continued Affiliate medium-term outperformance – 80% of 5-Year Affiliate strategies have outperformed as at 30 June 2021
Cash and Principal Investments of $155.0 million at 30 June 2021. Facility from CBA extended from $30.0 million to $100.0 million and fully drawn down on 30 June 2021. The additional $70.0 million cash was invested into liquid funds managed by Affiliates on 1 July 2021 until required, providing ‘dry powder’ for potential business investments
